The UK government have announced emergency measures will be set in place to help run Birmingham City Council during its financial crisis, with commissioners with powers to make decisions directly overseeing the effectively bankrupt authority.
It follows Levelling Up secretary Michael Gove saying that senior leadership figures at the Labour-run council had harmed the city.
The authority is facing the prospect of a £760m bill to settle equal pay claims – which could increase by £5 - 14m each month. Mr. Gove added that a local inquiry would also be launched.
He said that the government was prepared to extend additional financial support to the city, but warned of tough decisions ahead, with either a hike in council tax or a sale of assets possible. Speaking in Parliament, he went on: "Poor leadership, weak governance, woeful mismanagement of employee relations and ineffective service delivery have harmed the city".
"I do not take these decisions lightly, but it is imperative in order to protect the interests of the residents and taxpayers of Birmingham, and to provide ongoing assurance to the whole local government sector."
He confirmed that the commissioners would have the means to make decisions directly, if needed, with the inquiry considering the more fundamental questions of how the city got into its position. The council had to prepare, and agree, an improvement plan within six months but had only five working days to make representations, Mr Gove announced.
Responding in the Commons, Shadow Levelling Up secretary, Angela Rayner, described the cause of the crisis in local government as “being caused by the Conservatives' wrecking ball".
"With every swing, another local council is pushed to the brink and another local community falls over the edge," she said. "And this isn't a one-off.
“So can I ask Mr Gove what work his department is doing to support local authorities that are warning of financial distress now?" The leader of Birmingham's administration, John Cotton, said the authority would now work with the government to get the council back on "a sound financial footing".
He had been concerned there was a lack of senior capacity at the council "to deal with the issues that we faced", he posted on X, formerly Twitter. The council is also facing a projected deficit of £87m in this year's budget.
As a result of the inability to balance the books, it earlier this month announced all new spending would cease, although services it has a statutory duty to provide - including education, social care and waste collections - will continue. Two months before the issuing of that Section 114 notice, which formally outlined the constraints, the council said it had taken the decision to stop spending on all "non-essential" services.
What those are have yet to be announced. Mr Gove has appointed Max Caller as the lead commissioner, a previous adviser to the city who has since said that hosting the Commonwealth Games in Birmingham was a mistake.
Mr Caller, a former chief executive of the London boroughs of Hackney and Barnet, was the lead commissioner in the recent intervention at Slough Borough Council, and was previously lead inspector for best value inspections at Liverpool and Northamptonshire councils. West Midlands Mayor Andy Street said the council's situation was an "avoidable tragedy" but added he fully supported the government's intervention.
"What is mission critical now is for the commissioners to work with the council to protect services for residents and businesses across the city," he said in a statement.
"Both should work in tandem to address the equal pay bill as quickly and effectively as possible to get the council back on a secure financial footing. He said that the review must be rigorous in identifying and then resolving the underlying cultural and process failings in the council once and for all.
An extraordinary general meeting of the full council is due to be held next Monday to discuss a financial recovery plan. In a report released ahead of it, chief executive Deborah Cadman said that work to address problems must be urgent, will involve hard choices about what we deliver and how we operate and will result in a smaller organisation.
The council has already paid out more than £1bn in compensation to underpaid workers. The settling of claims in 2012 followed a court ruling that found hundreds of mostly female employees, working in roles such as teaching assistants, cleaners and catering positions, missed out on bonuses given to staff in traditionally male-dominated roles such as refuse collectors and street cleaners.
In June, it emerged there was a further £760m equal pay liability - a sum equivalent to the entire annual spending on services and no means to meet the bill. Financial support from the government could take the form of permission to borrow money to service debt, or sell assets, such as buildings and land, to raise cash to deal with its financial liabilities – with this leading to speculation over which assets could go.
When asked in Parliament whether the commissioners' powers would extend to decisions to raise council tax and sell assets, Mr Gove said: "It has sadly been the case in the past with local authorities that have failed, like Croydon and like Slough, that we have needed both to increase council tax in certain circumstances and to dispose of assets."
But he added it was too soon to say what interventions would be required. Professor Tony Travers, visiting professor in the London School of Economics' Department of Government, said that selling off assets would not provide money immediately to relieve 'annual' budget pressures. He said, however, that the government had in the past allowed Birmingham to "capitalise" spending earmarked for equal pay, meaning the council could use the money from asset sales to cover such liabilities.
Leader of the Conservative opposition in Birmingham, Councillor Robert Alden, called for more transparency from the authority over equal pay claims. He went on to say that the Labour administration had failed to get a grip of the issue, adding that they had not listened to the opposition, officers, auditors or trade unions.
"They have put their heads in the sand instead of facing up to the mess they've made," he said. The GMB union called on the authority to compensate women affected by inequalities in pay.
"The quickest, cheapest and fairest way to get a grip of the crisis in Birmingham is to work with GMB to end the discrimination and to compensate the women," said Rhea Wolfson, the union's head of industrial relations. Meanwhile, Unite warned it would fight any attempt to cut jobs of its members at the council ahead of the commissioners' takeover.
General secretary Sharon Graham said: "No-one should be under any illusion, Unite will never sit back and allow our Birmingham city council members' jobs to be sacrificed to pay for others' failures.
"If there is any attempt to cut the jobs, pay or conditions of our members, Unite will fight those proposals using every resource available to the union."
